KRISHNA BAI, HYDERABAD,HYDERABAD vs. ITO, WARD-8(2), HYDERABAD, HYDERABAD

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ITA 238/HYD/2015Status: DisposedITAT Hyderabad23 May 2018AY 2009-109 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's claim of paying only Rs. 11,00,000/- in cash was not acceptable as the vendor's records and a copy of the agreement indicated Rs. 21,00,000/-. The assessee's consent to both versions of the agreement further supported the vendor's claim.

What were the facts?

The assessee claimed to have paid Rs. 11,00,000/- in cash for a construction agreement, but the vendor's books and a copy of the agreement showed Rs. 21,00,000/-. The Assessing Officer and CIT(A) confirmed the addition of Rs. 10,00,000/- as unexplained investment.

What were the issues?

Whether the addition of Rs. 10,00,000/- as unexplained investment is justified when there is a discrepancy in the cash payment amount between the assessee and the vendor.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD

Before: SMT P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN

For Appellant: Shri Bhupesh Kumar Dand
For Respondent: Smt. B. Vishnu Priya
Hearing: 24/04/2018Pronounced: 23/05/2018

PER S. RIFAUR RAHMAN, A.M.:

This appeal filed by the assessee is directed against the order dated 19/12/2014 of CIT(A) – 2, Hyderabad for AY 2009-10. 2. We find that there was a delay of one day in filing the appeal before us. The assessee filed an affidavit wherein it was affirmed that inadvertently she considered the date of receipt of appellate order as 9th January, 2015 as against 8th January, 2015, due to which, one delay in filing the appeal. In view of the above, we condone the said delay of 1 day and admit the appeal for adjudication.

3.

Briefly the facts of the case are, the assessee filed her return of income for the AY 2009-10 on 28/07/2009 admitting a total income of Rs. 5,72,170/- and filed a revised return of income on 29/07/2009 by admitting a total income of Rs. 5,93,530/-. The AO completed the assessment u/s 143(3) on 21/11/2011 by determining the total income at Rs. 90,53,741/- by making various additions including the addition of Rs. 10,00,000/- towards unexplained investment and the same was confirmed by the CIT(A), which is the subject matter in this appeal.

4.

The facts relating to unexplained investment are, the AO observed that the perusal of the ledger account of the assessee as per the books of M/s Royal Home Constructions, situated at Road No. 12, Banjara Hills, Hyderabad, revealed that the assessee had paid advance of Rs. 21,00,000/- on 12/12/2008 for the purchase of flats but the scrutiny of the bank accounts submitted by the assessee has no such withdrawals. Further, he observed that the perusal of the sale deed as per the document No. 7882/2008 dated 24/10/2008 revealed that the assessee had received cash of Rs. 16,90,000/- out of the total consideration of Rs. 1,08,90,000/- and out of which assessee had deposited cash to the extent of Rs. 6,90,000/- and remaining amount of Rs. 10,00,000/- may be available with the assessee. In view of the above observations, the AO held that out of the above advance of Rs. 21,00,000/-, assessee had only of Rs. 10,00,000/- and remaining amount of Rs. 11,00,000/- was treated as unexplained investment from unexplained sources as it was evident that the assessee had claimed only Rs. 1,00,00,000/- for exemption and also certified that investment in flat at Rs. 1,00,00,000/- in the income tax return itself while arriving capital gains.

5.

Aggrieved, the assessee preferred an appeal before the CIT(A) and filed written submissions, which are as under: " The assessee paid advance of Rs. 11,00,000/- to M/s. Royal Home Constructions towards purchase of flat. The assessing officer has come to the conclusion that the assessee had paid an advance of Rs.21,00,000/- and not Rs. 11,00,000/- as stated by the assessee. This sum he has arrived at on the perusal of the so called ledger account of the assessee in the books of M/s. Royal Home Constructions. Copies of registered agreement of sale and construction agreement evidencing the above are enclosed herewith. This information collected behind the back of the assessee was not furnished to the assessee and to denial of natural justice. Furthermore, documentary evidence would also reveal the above factual position.

Therefore, the assessee prays that this addition may kindly be deleted."

5.

1 The CIT(A) referred the matter to the AO for examination. The Assessing Officer in his remand report has stated as under:

"It is the contention of the assessee, that she had paid only Rs. 1,00,00,000/- as purchase consideration towards purchase of two flats to M/s. Royal Home Constructions. As per the ledger extract, the assessee had paid amounts totalling to Rs. 1,10,00,000/- and difference of Rs. 10,00,000/- was paid by way of cash. Since the assessee is unable to explain sources for this amount the same has been added to the income returned. In connection with the said addition the ledger extract of M/s. Royal Home constructions as available on record has also been forwarded. However, M/s. Royal Homes constructions vide their letter dated 01-10-2013 submitted in this office on 18-10-2013 stated that the exact consideration paid by Smt. Krishna Bai is Rs.1,10,00,000/-. They further enclosed the copy of the registered agreement of sale vide doc no.3213/08 dated 17-12- 2008 wherein the value mentioned is Rs.60,00,000/- and construction agreement dated 17-12-2008 wherein the value mentioned is Rs.51,00,000/-. Thus, the total consideration paid by the assessee comes to Rs.1,11,00,000/-. The copies of both registered agreement of sale and construction agreement are enclosed herewith for your perusal. Since the evidence gathered is against the arguments of the assessee, the same may also be considered and the addition made by the AO may be confirmed.”

5.

2 The Addl. CIT while forwarding the remand report of the AO made the following comments which has reproduced as under:

"The comments of the undersigned in the case of smt. Krishna Bai, A.Y 2009-10 are given as under:

In this case, the AO has submitted a report in continuation to the remand report dated 03-10-2013 submitted earlier. The assessee's contention was that she had paid purchase consideration of Rs.1,00,00,000/- only to M/s. Royal Home constructions towards purchase of two fiats, whereas, the copies of ledger extracts showed that an amount of Rs.1,10,00,000/- was paid by the assessee. Since, the made in cash of Rs.10,00,000/-, the said amount was added to the total income admitted. Further, it Is also observed from the letter dated 01-10-2013 along with the copies of the sale deed and construction agreement furnished by M/s. Royal Home constructions before the assessing officer showed that the total purchase consideration paid by the assessee was to the tune of Rs.1,11,00,000/- (Rs.60,00,000 + 51,00,000). This clearly goes to show that the amount of Rs.11,00,000/- was in fact paid by the assessee for which the no proper sources were furnished and as such the addition of Rs.10,00,000/- made by the AO may be confirmed.

5.

3 From the above, the CIT(A) observed that the assessee filed copy of the construction agreement dated 17-12-2008 wherein the cash payment was shown at Rs. 11,00,000/- as against the figure of Rs.21,00,000/- found in the copy of the same construction agreement dated 17-12-2008 obtained by the AO from M/s. Royai Home constructions, the vendor. On a specific query, the assessing officer examined the assessee’s son Sri Vijay Kumar, who represented the assessee Smt. Krisna Bai and Sri P. Nitin, Managing Partner of M/s. Royal Homes Constructions. The relevant portion of the assessing officer's report is extracted as under. "In the sworn statement recorded, the managing partner of firm M/s. Royal Homes Constructions has deposed that the assessee Smt. Krishna Bai was one of their customer who purchased flat nos.504 & 507 constructed under the name and style of 'Signature' at Himayatnagar, Hyderabad and has entered into an agreement of sale dated 17-12-2008 with Smt. Krishna Bai for purchase of the above mentioned flats 505 & 507 for a consideration of Rs.60,00,000/- and also entered into a construction agreement on 17-12-2008 for a sum of Rs.51,00,000/- for completing the semi-finished flat with all amenities. The managing partner of firm has confirmed that they received consideration of Rs.60,00,000/- for purchase of semi- finished flats and also confirmed that for the construction purpose the firm has received an amount of Rs. 30,00,000/- through cheques dated 17-12-2008 and Rs.21,00,000/- in cash on 12-12-2008 from Smt. Krishna Bai .

In response to a specific question in the sworn statement about the discrepancy between the assessee Smt. Krishna Bai and the firm M/s. Royal Homes Constructions about the payments made in cash as to whether it was Rs.11,00,000/- as mentioned by Smt. Krishna Bai or the amount of Rs.21,00,000/- as him wherein an amount of Rs.21,00,000/- mentioned as paid in cash is correct and denied the copy of the construction agreement filed by Smt. Krishna Bai mentioning Rs.11,00,000/- as paid in cash. It has been stated that initially the customer insisted for the price for construction of semi finished flats at Rs.41,00,000/-, where as we have bargained that the price of Rs.51,00,000/- was feasible. In this situation the second page of the construction agreement wherein the details of amounts for construction was mentioned, were signed by both the parties. But it was stated that finally the price of Rs.51,00,000/- has been materialised and the customer Smt. Krishna Bai has paid Rs.30,00,000/- through cheques and Rs.21,00,000/- in cash, which was duly reflected in our books of accounts. In this regard, a copy of the ledger extract of Smt. Krishna Bai in the firms books of account was submitted and it has been stated that the firm has received an amount of Rs.21,00,000/- in cash which was duly accounted for in the books of account of the firm and taxes were paid accordingly on the income computed.

In the sworn statement recorded from the Smt. Krishna Bai's son, he has stated that he is producing the original document of the construction agreement entered with M/s. Royal Homes Constructions. When the two copies of the agreement were shown to Smt. Krishna Bai's son and asked to confirm the contents in the two agreements and also confirm the amount mentioned along with the signatures made therein, he has stated that his mother has paid only an amount of Rs.11,00,000/- in cash as per the original document in their possession. About confirmation of the signatures mentioned in the copy of the construction filed by the firm M/s. Royal Homes Constructions, he has stated that as the copy of the construction agreement furnished by the firm M/s. Royal Homes Constructions is a Xerox copy and not original, he cannot confirm the signatures made in the said construction agreement. He has reiterated that his mother has paid an amount of Rs.11,00,000/- only in cash to the builder M/s. Royal Homes Constructions.

However, it is to submit that when both of the parties were asked as to whether they require cross examination of the other party, they have not insisted for the same and only confined to their own statements.”

5.

4 The CIT(A) provided an opportunity in accordance with the principles of natural justice to the assessee to explain the case on the report of the assessing officer. The assessee in her reply filed on 15- 12-2014. The same is reproduced as under:

"I am receipt of a copy of Remand Report of Assessing Officer, Range-8(2), Hyderabad, forwarded by Joint Commissioner of Income Tax Range to the learned CIT(A)-II, Hyderabad.

After going through the same, I submit as here under:

At the outset I deny having paid Rs.21,00,000/- (in words Twenty Lakhs) in cash to M/s. Royal Home Constructions. However I confirm that l have paid a sum of Rs.11,00,000/- (in words Eleven Lakhs) only in cash to M/s. Royal Home Constructions.

To the best of my knowledge I have not executed two documents/agreements one for Rs. 21,00,000/- and one for Rs.11,00,000/- as stated in the Remand Report. I am in possessing of the agreement executed by me for Rs.11,00,000/- which has been constructed by M/s Royal Home Constructions.

Hypothetically arguing to the proposition made out by the assessing officer that only cheques will be mentioned in real estate agreements, the very fact that Rs.11,00,000/- paid in cash is also reflected in the agreement itself proves the genuineness of the agreement. Even for a minute if it is assumed that two set of documents are made out of one for Rs.21,00,000/- and other for Rs.11,00,000/- the agreement which is advantage to party will be definitely with the said party.

Hence in the instant case, when M/s Royal Home Constructions is stating that it has received Rs.21,00,000/- in cash they should be definitely in the possession of the said agreement, which they are denying. Thus it proves that what they have stated is not correct. Merely by accounting a sum of Rs.21,00,000/- against my name, without any evidence defies logic and appears to cover up the differential amount in their kitty. It might be also possible that sum received from other flat buyers may have been credited against my name, which is not correct.

Hence I object to the above theory and once again state that I have paid only a sum of Rs.11,00,000/- in cash to M/s. Royal Home constructions for which I have documentary evidence.

In light of my above submissions and the fact that I have indisputable evidence in form of original agreement, i request your good selves to consider the above and delete the addition made in the assessment order even on this count."

5.

5

In view of the above factual matrix, the CIT(A) observed that in the agreement given by the assessee to the department the amount of cash payment was mentioned as Rs. 11,00,000/- whereas in the copy of the agreement, obtained from the vendor, the cash amount of cash payment was mentioned as Rs.21,00,000/-. Further, he observed that the assessee chose to make it appear that the cash paid was only Rs. 11,00,000/-. The vendor has accounted the amount of Rs.21,00,000/- in his books and offered it for taxation. The assessee's son who represented the assessee before the assessing officer declined to cross examine the vendor. The reluctance of the assessee to cross examine the vendor is a clear indication of the incorrectness of the assessee's contention that the assessee paid only Rs. 11,00,000/- in cash. In view of the above observations, the CIT(A) confirmed the addition made by the AO by holding that there was no reason to agree with the assessee’s contention.

6.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:

“1. The order passed by the Commissioner of Income Tax (Appeals) is erroneous in law and on facts of the case.

2.

The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.10,00,000/- towards unexplained Investment. The Learned CIT (Appeals) - II failed to appreciate the fact that the Original agreement which clearly states that the Appellant has only paid Rs 11,00,000/- in cash to M/s Royal Home Constructions and has upheld the Assessing Officers contention that since the vendor has accounted Rs 21,00,000/- in his books, the appellant has paid Rs 21,00,000/-

3.

The learned Commissioner of Income Tax (Appeals) erred in upholding the Assessing officer’s contention by invoking provisions of sec 50C without appreciating the fact that the actual land being sold was to the extent of 495 Sq. yards as against the documented area of 605.55 Sq. yards on account of road widening.

4.

Any other Ground/s that may be urged at the time of hearing.”

7.

Ld. AR submitted that in the Remand Report, the Assessing Officer has made an interesting observation that nobody keep the evidence for cash and the assessee is taking advantage of that. Actually it is vice - versa. If the person is accounting such cash entry definitely he will be keeping cash receipt. In the instant case, no such receipts are in existence. Moreover, the assessee has got the original agreement of construction wherein it is clearly mentioned that only a sum of Rs.11 Lacs has been paid in cash. The said agreement is duly authenticated by all the signatories to it. The agreement relied on by the Assessing Officer wherein allegedly a sum of Rs.21,00,000/- is stated to be paid in cash is only a Xerox copy whose authenticity cannot be established. Just because, M/s. Royal Home Constructions has accounted a sum of Rs.21 Lacs in the assessee’s account in its books unilaterally the same cannot be considered for addition without establishing otherwise. Ld. AR further submitted that it would not be out of place to mention herein that in the original order of assessment, the Assessing Officer in Para - 8 of his order has categorically come to a conclusion that the assessee may be having only Rs.10,00,000/- in cash and had come to a conclusion that differential amount of Rs.10,00,000/- i.e. 2100000-1100000 has been paid out of Unexplained sources. He, therefore, prayed that the addition may be deleted.

8.

Ld. DR, on the other hand, relied on the orders of revenue authorities.

9 Considered the rival submissions and perused the material on record. The only issue before us is, the assessee has entered into construction agreement with M/s Royal Home Constructions and claims to have paid Rs. 11,00,000 in cash, which recorded in the original agreement in its possession. Whereas the construction company, recorded the receipts as Rs. 21,00,000/- received from assessee by submitting a copy of the construction agreement and ledger in which it had recorded as receipt of Rs. 21,00,000/-. On same i.e. ‘N146995’. We also noticed that the second page of the agreement, which is supplement sheet, the contents of the clauses are not same in both the copies. Copy of both agreements are part of this order vide Annexure. But, we noticed that assessee has signed in both the agreements, it clearly shows that assessee has consented to both the agreements. Further, the construction company has recorded the cash receipts in their books, when they received the payment in one transaction. There is no necessity on the part of the construction company to modify the same, where there is no interest. Therefore, in our view, the claim of the assessee cannot be accepted and we are in agreement with the findings of the CIT(A). Accordingly, ground raised by the assessee is dismissed.

10.

In the result, appeal of the assessee is dismissed. Pronounced in the open Court on 23rd May, 2018. (P. MADHAVI DEVI) ACCOUNTANT MEMBER Hyderabad, Dated: 23rd May, 2018 kv Copy to:-

1) Smt. Krishna Bai, 21-7-621, Chelapura, Hyd. 2) ITO, Ward – 8(2), Hyderabad. 3) CIT(A) –2, Hyderabad. 4) CIT - 2, Hyd. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File

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